Frontier Agriculture positive despite drop in turnover and profit

Business: Chairman says market for crop inputs saw ‘significant volume and market pressure’

Britain’s largest arable inputs and marketing firm has hailed a “very strong performance” despite a drop in turnover and pre-tax profits.

Frontier Agriculture, which operates across 46 sites in the UK including Perth, reported turnover of £1.387 billion for the year ended June 30 2016.

This is down from £1.444bn the year before.

The firm, which carries out marketing for north-east grain cooperative Aberdeen Grain, posted pre-tax profits of £32.54 million in the year, which is down from £33.975m previously.

UK sales were down 10% to £1.162bn, from £1.297bn previously, while sales to the rest of the world were up 50% to £225.441m, from £147.293m before.

In accounts filed with Companies House, group chairman David Yiend said: “For the fourth year running record global wheat yields raised coarse grain inventories to over 30% of production – dampening commodity price volatility and weakening crop values.

“In the UK a relatively bearish euro outlook exaggerated this affect causing feed wheat values to hover around £100 per tonne for much of the year – below the average cost of production.”

He said the market for crop inputs experienced “significant volume and margin pressure” as a result of farmers looking to align their costs of production more closely with output prices.

Grain exports were made difficult in the first half of the year due to the high value of sterling, however this reversed in 2016 as concerns over Brexit grew.

“The combination of low market volatility, bearish prices and pressured crop gross margins made it a very tough trading environment for all farm gate businesses,” added Mr Yiend.

“Despite these challenges Frontier once again demonstrated its adaptability and resourcefulness delivering an operating profit of £33 million – a strong performance indeed.”

He said recently acquired grain marketing partnerships with Aberdeen Grain, Camgrain and Woldgrain were developing strongly and had helped lift grain volumes to a record 5.8m tonnes.

Mr Yiend added that the group, which employs more than 980 people, had committed £6.2m to new capital expenditure in the year, towards “customer-facing assets in grain storage, seed processing, crop protection distribution, crop trials and smart IT software”.

He said the acquisition of UK-based trace element business Brian Lewis Agriculture, now trading as Intracrop, would provide access to new markets.

The accounts also revealed that the highest-paid director was awarded £758,000 in the year, up from £699,000 the year before.

The combination of low market volatility, bearish prices and pressured crop gross margins made it very tough... DAVID YIEND